Correlation Between Diamond Hill and Blackrock Floating

Can any of the company-specific risk be diversified away by investing in both Diamond Hill and Blackrock Floating at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Diamond Hill and Blackrock Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diamond Hill Investment and Blackrock Floating Rate, you can compare the effects of market volatilities on Diamond Hill and Blackrock Floating and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Diamond Hill with a short position of Blackrock Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and Blackrock Floating.

Diversification Opportunities for Diamond Hill and Blackrock Floating

0.62

Correlation Coefficient

Diamond Hill  Blackrock Floating

Poor diversification

The 3 months correlation between Diamond and Blackrock is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Blackrock Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Floating Rate and Diamond Hill is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Diamond Hill Investment are associated (or correlated) with Blackrock Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Floating Rate has no effect on the direction of Diamond Hill i.e., Diamond Hill and Blackrock Floating go up and down completely randomly.

Pair Corralation between Diamond Hill and Blackrock Floating

Given the investment horizon of 90 days Diamond Hill is expected to generate 1.12 times less return on investment than Blackrock Floating. In addition to that, Diamond Hill is 2.84 times more volatile than Blackrock Floating Rate. It trades about 0.1 of its total potential returns per unit of risk. Blackrock Floating Rate is currently generating about 0.33 per unit of volatility. If you would invest  1,258  in Blackrock Floating Rate on September 6, 2024 and sell it today you would earn a total of  158.00  from holding Blackrock Floating Rate or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Diamond Hill Investment  vs.  Blackrock Floating Rate

Diamond Hill Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal forward indicators, Diamond Hill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blackrock Floating Rate

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Floating Rate are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat uncertain basic indicators, Blackrock Floating may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Hill and Blackrock Floating

The main advantage of trading using opposite Diamond Hill and Blackrock Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, Blackrock Floating can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Blackrock Floating will offset losses from the drop in Blackrock Floating's long position.

The idea behind Diamond Hill Investment and Blackrock Floating Rate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.